In the mid-2000s, Efraim Diveroli became infamous as a young international arms dealer whose company, AEY Inc., landed a massive $298 million Pentagon contract to supply ammunition to allied forces in Afghanistan. Operating out of a Miami apartment while barely in his twenties, Diveroli sourced cheap, aging surplus ammunition from Eastern Europe and repackaged it to fulfill government orders. The scheme collapsed when federal audits revealed that much of the weaponry was dangerously corroded, unusable, and illegally sourced from Chinese stockpiles under arms embargoes. Diveroli's story exposed profound vulnerabilities in wartime military procurement, ultimately leading to federal fraud charges and a four-year prison sentence.
Before AEY Inc. became a household name—largely popularized by the 2016 film War Dogs—Diveroli was just a teenager fascinated by firearms and global trade. Raised in Miami Beach within an Orthodox Jewish family, he dropped out of high school at age sixteen and moved to Los Angeles, where he worked for his uncle in the firearms trade. There, he learned the intricacies of broker licenses, brokerage fees, and international shipping loopholes. Returning to Florida in 2005 at age twenty-one, he founded AEY Inc., positioning himself as an aggressive, tech-savvy broker who could undercut legacy defense contractors by sourcing cheap military hardware online through public government procurement portals like FedBizOpps.
The defining moment of Diveroli's career arrived when AEY secured the $298 million contract through the Coalition Support Fund to equip the Afghan National Army. Winning such a massive government award with virtually no full-time staff or permanent warehouse shocked traditional defense insiders. Diveroli relied on his childhood friend David Packouz to help manage operations, while they worked out of a modest office space. To fulfill the contract's massive quotas, Diveroli scoured former Soviet-bloc countries like Albania, Montenegro, and Romania, buying up cheap, decades-old surplus ammunition that other brokers avoided.
The procurement operation quickly turned fraudulent. Much of the ammunition stored in Albanian warehouses dated back to the 1940s and 1950s, suffering from severe corrosion, water damage, and degraded propellant. Furthermore, U.S. federal law prohibited the importation and sale of Chinese-made military equipment due to an ongoing arms embargo. Diveroli and his associates engaged in extensive repackaging schemes, stripping Chinese markings off wooden crates and transferring the ammunition into generic boxes to conceal its origin from Pentagon inspectors. When these substandard and prohibited bullets arrived in Afghanistan, military personnel found that ammunition crates were filled with rotten packaging and rusted rounds that jammed rifles in active combat zones.
The house of cards collapsed in 2007 when the New York Times published a major investigative report detailing AEY's questionable practices, prompted by a congressional inquiry and a whistleblower inside the Pentagon. Subsequent federal investigations by the U.S. Army Criminal Investigation Command and the Department of Justice uncovered thousands of pages of fraudulent shipping documents, illegal international arms shipments, and blatant contract violations. In 2009, Diveroli pleaded guilty to one count of conspiracy to defraud the United States. In January 2011, a federal judge sentenced him to four years in federal prison, while Packouz received seven months of house arrest.
The fallout from the AEY scandal triggered widespread reforms within the Department of Defense regarding how small-business contracts are vetted and awarded. Lawmakers and military watchdogs criticized the Pentagon's lax oversight, which had allowed an inexperienced twenty-something to handle critical national security logistics without rigorous background checks or physical inspections of overseas stockpiles. Today, defense procurement guidelines include stricter vetting procedures, mandatory origin verification for all foreign-sourced munitions, and tighter restrictions on third-party brokers bidding on primary supply chains.
Frequently Asked Questions
What was AEY Inc.?
AEY Inc. was a private arms brokerage firm founded by Efraim Diveroli in Miami in 2005. It specialized in sourcing and supplying military equipment, ammunition, and weaponry to the U.S. government and allied forces through competitive federal bidding contracts.
How did Efraim Diveroli get caught?
Diveroli was caught after investigative journalists and federal auditors scrutinized a $298 million Afghan ammunition contract. Inspections revealed that AEY supplied severely degraded, rusted ammunition and illegally repackaged prohibited Chinese-made weapons to hide their origin.
Where is Efraim Diveroli now?
After serving his four-year federal prison sentence, Diveroli was released in 2014. He has since kept a relatively low profile, though he briefly attempted to launch a medical marijuana venture and published an autobiographical book detailing his perspective on the AEY scandal.
How accurate is the movie War Dogs?
The 2016 film War Dogs, directed by Todd Phillips and starring Jonah Hill as Diveroli, is based on a Rolling Stone article by Guy Lawson. While it captures the chaotic atmosphere and general timeline of the events, filmmakers dramatized several episodes, added fictionalized dialogue, and compressed complex logistical operations into a fast-paced Hollywood narrative.
